Mr. CASSATT. No, sir; I have no personal knowledge of water transportation.

The CHAIRMAN. Your company is constructing a new freight line of road, is it not?

Mr. CASSATT. Yes, sir.

The CHAIRMAN. What are the termini of that line?

Mr. CASSATT. It starts from Driftwood, on the Philadelphia and Erie, and runs to Redbank. It makes a low-grade line from Pittsburgh to Harrisburgh.

The CHAIRMAN. What will be the grades?

Mr. CASSATT. I think the maximum grade is 16 feet per mile against the east-bound tonnage.

The CHAIRMAN. What is it on the present Pennsylvania Road?

Mr. CASSATT. We have there 52 feet against east-bound traffic and 96 against west-bound. The maximum grade west bound on the "lowgrade line" is about 26 feet.

The CHAIRMAN. What will be the increase of the distance by that line from Pittsburgh to New York?

Mr. CASSATT. That depends on whether we take the freight around by Philadelphia or not.

The CHAIRMAN. By the route you would adopt will the distance be increased or diminished?

Mr. CASSATT. It will be about ninety miles further by Philadelphia. Mr. DAVIS. What is your average passenger and average tonnage; the number of cars hauled by your locomotives?

Mr. CASSATT. I suppose we run about an average of six or seven passenger-cars to the train. On freight-trains probably twenty-seven or twenty-eight, taking an average of all trains, and of all parts of the road.

The CHAIRMAN. What are the average charges per ton on your road? Mr. CASSATT. One and four-tenths of a cent it was last year.

The CHAIRMAN. That included all tonnage moved, the local as well as the through.

Mr. CASSATT. Yes, sir.

The CHAIRMAN. Which is cheaper-the through or the local ?

Mr. CASSATT. The average of the through would be less than the local?

The CHAIRMAN. Do you know what is the average charge of your through tonnage from the West through the year?

Mr. LEWIS. It is a slight fraction over a cent, but I do not remember exactly what.

Mr. CASSATT. There is a large portion of our local tonnage we carry at that rate. All the coal business is done at about that rate. The CHAIRMAN. Can either of you gentlemen state the cost of the Pennsylvania road as it now stands; the actual cost in money? Mr. LEWIS. Not without looking at the report.

Mr. CASSATT. I can tell you how much was charged against it, but that does not represent the cost.

The CHAIRMAN. I do not understand the mode of keeping the account, but I want to ascertain.

Mr. CASSATT. The cost of the road between Philadelphia and Pittsburgh, including the equipment in all the shops, stations, and so on, stand on the books of the Company at $42,437,859.68. The CHAIRMAN. What is the distance?

Mr. CASSATT. Three hundred and fifty-five miles.
The CHAIRMAN. It stands on the books, you say?

Mr. CASSATT. That is, charged against capital account on the books, but of course there has been a great deal more money spent on it than that. The road is worth more than that to day, and it has cost more. The CHAIRMAN. Why does it not stand on the books?

Mr. CASSATT. Because the road has been improved out of the earnings. Track-bridges, rolling stock, &c., have been greatly improved. The CHAIRMAN. Is not that charged up to capital account?

Mr. CASSATT. No, sir; not all.

The CHAIRMAN. How is that charged; to maintenance?

Mr. CASSATT. We charge a portion of that to capital account, but for years past a great deal of construction work was done, and paid for out of earnings and charged to expense account.

The CHAIRMAN. What was the original issue of stock, if your report gives it?

Mr. LEWIS. The original issue of stock authorized was $10,000,000. The CHAIRMAN. What amount of bonds originally?

Mr. LEWIS. The original stock of $10,000,000 authorized, was for the construction of the road from Harrisburgh to Pittsburgh.

The original or first issue of bonds was for $5,000,000. The next or second issue of bonds was also for $5,000,000, and covered what was then the Pennsylvania Railroad Company, namely, from Harrisburgh to Pittsburgh. The Pennsylvania Railroad Company purchased from the State of Pennsylvania what was known as the Main Line of Public Works, namely, the Pennsylvania Canal from Pittsburgh to Johnson, the inclined planes and railway over the Alleghany Mountains to Hollidaysburg, and the canal thence to Columbia, in Lancaster County, and the railway from Columbia to Philadelphia, for the price of $7,000,000, which sum was a lien upon the said public works only, and payable in annual installments of $460,000, bearing 5 per cent. interest. On the 1st July, 1867, the company executed the general mortgage for $35,000,000, covering its entire line of railroad from Pittsburgh to Philadelphia, and out of the $35,000,000 there was set apart the sum of $16,329,457.98 to pay the following sums: First mortgage, $9,800,000; second mortgage, $4,904,000; amount due the State, $6,444,617.98. The actual bonded indebtedness, December 31, 1872, is $35,000,000, and by the treasurer's report on same date, the capital stock was $35,000,000.

The CHAIRMAN. It is now from Philadelphia?

Mr. LEWIS. Yes, sir; by buying the State works, and leasing the Harrisburgh and Lancaster Railroad.

The CHAIRMAN. I understood Mr. Cassatt to say a moment ago that the amount charged to capital was $42,000,000. I understand you now to say $53,000,000?

Mr. LEWIS. No, sir; the amount charged on the books of the company against the cost of constructing the road and equipment is $42,000,000, while the capital stock, July 1, 1873, is $53,000,000, and the bonds $35,000,000. That is $88,000,000 in all. The remainder, $46,000,000, is invested in various ways.

Mr. CASSATT. Page 41 of our report shows that, and shows how this surplus is invested in the bonds and stock of other companies controlled by the Pennsylvania Railroad.

The CHAIRMAN. How many issues of stock have there been of that road and when were they made?

Mr. LEWIS. There have been nine issues of capital stock under as many acts of the legislature of Pennsylvania.

The CHAIRMAN. Have you any means of stating accurately the

amounts received for each and all of those issues of stock by the com pany, and expended in the road?

Mr. LEWIS. It is all recorded on the treasurer's books.

The CHAIRMAN. You have access to those and charge of them, have you not?

Mr. LEWIS. No, sir; I have not charge of the treasurer's books, but the list is as follows:

The CHAIRMAN. Without attempting to conceal the idea I am coming at, has there ever been any stock issued by your road, and, if so, how much, for which the face par value has not been paid?

Mr. LEWIS. Every share of stock has been fully paid for in cash. There was a dividend made in 1864 of $4,130,760 out of surplus earnings (profits) payable in capital stock, equal to 30 per cent. on the then outstanding capital of $13,769,200. These surplus profits were from the previous accumulations of the company, and were represented by actual investments in good securities in the hands of the treasurer, and the profit and loss account was by this dividend debited with a corresponding amount of capital stock.

The CHAIRMAN. A portion of the money came from bonds?

Mr. LEWIS. If you mean to pay this divided, no, sir; it all came from net earnings of the road.

The CHAIRMAN. And that was distributed as a dividend among the stockholders?

Mr. LEWIS. Yes, sir.

The CHAIRMAN. Have there ever been any other issues of that kind?

Mr. LEWIS. Yes, sir. Out of surplus earnings there was one in 1867 of $1,000,000, being 5 per cent. on the capital stock of that date, and again in 1868 of $1,051,937.50, being 5 per cent. on the capital stock of that date, but all the other issues of stock have been regularly subscribed and paid for by the subscribers therefor. At same dates there were cash dividends of 3 per cent.

The CHAIRMAN. The capital stock is now how much?
Mr. CASSATT. On the 1st of January it was $53,000,000.

Mr. LEWIS. Since that there has been an issue of stock at the par value of $50 per share to the stockholders.

The CHAIRMAN. Sold to the stockholders for the purpose of making other investments with?

Mr. LEWIS. Yes, sir, and paid for in cash, to increase and improve the property and equipment of the company.

Mr. CASSATT. An analysis of this report, which I hand you, shows that there is no water in the stock. I think an examination of the statement on page 41 will show that very clearly; the road and equipment has cost very much more than is charged against it, and is worth to-day

double the amount charged against it. A very brief examination of the company's property will convince any one conversant with railroad management of the correctness of this statement.

Mr. LEWIS. I will state that at the time the $4,130,760 of surplus profits was distributed in stock, it was largely on account of very heavy pressure brought to bear by the stockholders, who thought that, as the road earned money, they should have some benefit from it. The line of argument they used was, that "we do not care if your road would sell for $50,000,000 while it only cost $25,000,000; that is no benefit to us; we want to sell now; we want to realize now." The direction of the company gave way to it just that much as to issue that amount.

The CHAIRMAN. Were those surplus earnings, over and above a certain percentage, divided among the stockholders and paid to the owners?

Mr. LEWIS. Yes, sir.

The CHAIRMAN. What was that?

Mr. LEWIS. The usual dividends of the company have been 10 per cent. since November, 1868; prior to which they varied from 6 to 8 per cent. annually. They passed one dividend, I think, in November, 1857. The railroad during its construction, and until it was opened continuously from Harrisburgh to Pittsburgh, earned net revenues equal to 6 per cent. On its completion between these points as a single-track line, a balance was struck between the revenues and expenses, and then appeared a credit which was applied to the reduction of the cost of the roadway, in accordance with the terms of the charter of the company. If there had been a loss, they (the directors) were authorized to charge the deficiency to construction, so that the line when opened for use might start even.

The CHAIRMAN. When was that 30 per cent. issue?

Mr. LEWIS. In the year 1864.

The CHAIRMAN. What property has been purchased with this addi tional issue of stock and bonds over and above the $42,000,000 ?

Mr. CASSATT. There are $46,000,000 of property owned by the company, paid for out of the money realized from bonds and stock which have been issued.

The CHAIRMAN. What is the property purchased by the company for that $46,000,000 ?

Mr. LEWIS. In answer I submit here a statement of the treasurer's account to January 1, 1873, as submitted to the stockholders at their annual meeting, held March 11, 1873, from which the information asked may be obtained.

GENERAL ACCOUNT.

E.&O. E.-PHILADELPHIA, December 31, 1872.

OTHER ASSETS.

By amount of bonds of railroad corporations. amount of capital stock of railroad corporations..

amount of bonds of municipal corporations and investments not

CR.

balance in hands of agents.

balance in hands of treasurer

THOS. T. FIRTH, Treasurer.